Who must pay corporate tax on real estate in the UAE?

Any foreign company or non-resident entity that earns income from real estate or immovable property in the UAE must pay the tax.

When do companies need to register for corporate tax?

Companies must register with the FTA within one year from June 1, 2023, or risk facing penalties.

What types of property income are exempt from CT?

Property income is exempt if it’s owned by an individual for personal investment, or by qualifying investment funds and REITs.

How do companies calculate their taxable income from real estate?

Companies add up all income from real estate, subtract expenses, and pay 9% tax on the net profit.

Why did the UAE introduce corporate tax on real estate?

The government wants to align with global practices, support fairness, and increase revenue for national projects.

CT Liability on Real Estate UAE for Foreign Firms

CT Liability on Real Estate and Immovable Property in UAE for Foreign Companies

The United Arab Emirates (UAE) attracts foreign companies from every corner of the world. Companies see the UAE as a gateway for business growth. The country gives business owners many advantages, including friendly business rules, a strong location, and easy rules for setting up. However, when it comes to real estate and immovable property, foreign firms need to pay attention to new tax responsibilities. Understanding corporate tax (CT) liability in the UAE helps foreign companies operate safely and follow the law.

Scope of CT on Real Estate and Immovable Property

The Ministry of Finance in the UAE issued a recent clarification about corporate tax. Now, foreign companies and non-resident entities must pay a 9% corporate tax on any income they earn from real estate or immovable property in the country. This rule makes sure all companies, local or foreign, contribute their fair share.

The rule covers real estate used for business and for investments.
The law applies to income from offices, buildings, warehouses, land, and shops.
If a company buys or rents out a property for business, the profit is taxable.

Effective Date and Registration Requirements

The new corporate tax law became effective on June 1, 2023. The law says that every company that falls under this tax must register with the Federal Tax Authority (FTA) within one year from this date. If a business does not register on time, it may face fines and penalties.

Key points:

Companies should create a record of every real estate asset they own or manage.
The business must register with the FTA using official documents.
Registration is important for every company, even if the real estate is only for investment.

Calculation of Taxable Income

The government wants companies to pay tax only on profits, not on total revenue. So, when foreign companies calculate their tax, they can subtract relevant expenses from the total income. The corporate tax is then charged on the remaining profit.

Tax calculation steps:

Add up all the income from real estate activities in the UAE.
Subtract business expenses, like repairs, management fees, or loan interest.
Calculate 9% corporate tax on the final net profit.

Exemptions from Corporate Tax on Real Estate

Not all property income is taxable in the UAE. There are some important exemptions. If a foreign or UAE-resident individual owns property for personal investment and not for business, this income is usually exempt. The government also exempts:

Real estate investment trusts (REITs).
Qualifying investment funds.
Property income from individuals, unless the activity counts as a licensed business.

If you want to make sure your property income is exempt, you must check the law or ask a tax consultant.

Uses and Effects of the New Law

The UAE government introduced this corporate tax on real estate for several reasons. The law:

Aligns the UAE with international tax practices.
Helps foreign investors trust the UAE market.
Makes sure all businesses, local and foreign, compete fairly.
Increases revenue for the government to support new projects.

The law gives clarity to business owners and helps maintain the UAE’s place as a top destination for global business.

Conclusion

The new corporate tax law on real estate income means foreign companies must pay attention to their UAE business activities. By following the law, registering with the FTA, and keeping careful records, foreign businesses can avoid trouble. These rules show the UAE is serious about being a fair, modern, and trusted place for companies. If you’re a foreign business with property in the UAE, always check your situation with a professional.

How Mubarak Al Ketbi (MAK) Auditing Can Help Your Company

Mubarak Al Ketbi (MAK) Auditing stands ready to help foreign companies with every step of the UAE corporate tax law. We can guide your business with: